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Sterling's fall and the impact on UK households

Geoff Riley

10th July 2016

Sterling has been depreciating heavily on the foreign exchange markets - it has fallen by around 11% against the Euro and by more agains the US dollar. There will be several impacts of a weaker currency on millions of UK households.

  1. Consumer price inflation is likely to rise by perhaps 2% as the prices of imported goods and services start to rise - much depends on the extent which businesses pass on higher import costs to final consumers. A weaker currency leads to a deterioration in the UK's terms of trades and - through higher prices - a reduction in real incomes
  2. A fall in the exchange rate ought to provide a competitive boost to UK exports - but there are doubts about the extent of any expansion in export sales.
  3. Some businesses thinking about locating to the UK to invest and then export into the EU are likely to be put off by the uncertainty surrounding when (if ever) the UK will press Article 50 of the Lisbon Treaty and the likely trade and investment relationships that will emerge between the UK and EU27

Chris Giles from the Financial Times provides a brief overview in this video

Sterling's fall and the impact on UK households

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Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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